Whether you’re a first-time homebuyer, a real estate agent guiding clients, or a homeowner planning to sell and buy another home, being mortgage-ready is crucial. As your trusted advisor, Josh High from Swift Home Mortgage is here to break down the process into manageable steps.
- Improve Your Credit Score: Your credit score plays a significant role in mortgage approval. Loans are available for credit scores as low as 500, but the process becomes more complicated. So, strive for the highest credit score possible. Lower your credit card balances to about 1-3% of the outstanding credit limit, and keep them low until the completion of the home purchase. Also, keep your old accounts open to maintain your credit depth. If you have any old collections or missed payments, consider consulting a credit repair professional.
- Get Your Finances in Order: Identify the funds you plan to use for the purchase and keep them in a single account. Minimize bank activity and unnecessary transfers, and ensure you can document all large deposits. If you’re liquidating assets to gather funds, use traceable methods of payment, such as checks, to create a paper trail. Remember, any deposit above 50% of your gross monthly income is considered a large deposit and needs to be sourced.
- Stabilize Your Employment: While changing jobs is not inherently problematic, switching from a W-2 to a 1099 job could delay your mortgage approval as it requires two years of self-employment records. Similarly, moving to a heavily commission-based job can also delay the process.
- Stay Current with Your Taxes: Stay up-to-date with your tax payments or have extensions filed. If you’re on a payment plan with the IRS, make sure you have a couple of payments on record. This will assure the underwriters that you’re making consistent payments.
- Understand Your Buying Power: It’s not just about what you can afford on paper; it’s about what you’re comfortable spending each month. Work with your mortgage advisor to understand what different loan amounts mean for your monthly payments and overall lifestyle.
By following these steps, you can make your mortgage process smoother and more predictable. With careful planning and sound advice, your dream home is within reach!
